It was David Leibowitz’s first week behind a bustling Walgreens pharmacy counter in Chicago, and he was already picking up on something special. At this point, he was more of an observer – a fly on the wall – but he had the perfect vantage point to witness pharmacy team members greeting patients by name, asking how their mother was doing or if their son made the basketball team.
Leibowitz wasn’t a pharmacist. He didn’t even work at Walgreens. He was from Microsoft, and his work was just getting started.
“I get immersed in a business by being hands-on, and it was really important for me to understand a day in the life of the Walgreens pharmacist,” says Leibowitz, Microsoft worldwide director of Industry Strategy Retail & CPG, who spent time at several Walgreens stores in Chicago shortly after Microsoft and Walgreens Boots Alliance announced a seven-year strategic partnership last January to advance and improve the future of health care. “My biggest takeaway was that when you remove the technology, it’s really about the people. Of course we want to drive new solutions and improve the experience, but you can’t replace that immediate connection.”
Leibowitz now spends more than half his time at WBA’s global headquarters in Deerfield, Ill., working hand-in-hand with Steve Lamontagne, WBA vice president of physical design and formats, on fusing the power of the human touch with technology. As we approach the one-year anniversary of the strategic partnership announcement, Walgreens News sat down with the pair to learn about what the two companies have been working on behind the scenes.
Walgreens News (WN): Thinking back to this time last year, what were your first thoughts when you heard WBA and Microsoft were partnering?
David Leibowitz: I thought it was a really innovative opportunity – it’s the intersection of retail, wellness, health care and technology. And I love the mission statement from your CEO, Stefano Pessina, about improving the lives of customers and patients. We’re really proud to be part of this journey with Walgreens.
Steve Lamontagne: It was clear that both of our CEOs, Stefano Pessina and Satya Nadella, were so passionate about transforming health care. And I was excited that we were planning to pair our large retail footprint with Microsoft’s strong technology backbone.
WN: What would people be surprised to learn about these two companies coming together?
SL: There are a lot of shiny pennies out there, but that's not what this partnership is about. I didn’t truly understand that until May 2019, when David and I first started working together. We had a team that went to Microsoft’s headquarters in Redmond, Wash., to hear about some of the opportunities Microsoft was seeing within our business. That was the first moment I started to realize this was much more than a company buying technology from Microsoft. This is very much about business transformation, and how we can come together to solve real problems and create real opportunities.
DL: That’s right. Everything we’re doing is through the lens of customers, patients and team members. It’s not about the underlying technology, it’s not the infrastructure, it’s not wizardry. It’s about improving the lives of these people – both in the physical and digital sense – and letting that drive the technical decision-making.
WN: Choose one word to capture the essence of Year 1.
DL: I don’t even get 140 characters? OK, I’ll go with “inspiring.” That’s how I’d describe the aspirational goals of both organizations, and seeing these two large companies and the teams behind them come together to drive this business and digital transformation.
SL: Mine is “alignment.” Especially in the second half of the year, both organizations have a much clearer roadmap on the work ahead.
WN: Let’s start at the beginning. What was the first priority?
SL: Early on, the work was focused on getting things to the cloud and introducing new collaboration tools such as Microsoft Teams and Yammer – the basics – across our Walgreens and Boots businesses. We began expanding our use of Microsoft’s Azure as our main cloud platform, storing our programs, data and systems across servers throughout the U.S. and around the world. Previously, most of Walgreens IT infrastructure lived in data centers in the Chicago suburbs. This has allowed us to really improve how we work, while lowering costs and modernizing our business.
DL: There has been a great deal of work on this foundational layer, which unlocks other opportunities to implement new solutions more quickly and cost-effectively. The first half of the year was about getting our plumbing right so we could create an infrastructure that would light up future possibilities.
WN: And what about the second half of the year?
SL: David and I met with our leadership teams in October to begin making recommendations on pilots that could really help us become a more modern retailer. We proposed two ideas that involved another Walgreens partner, Kroger, following our expansion to Knoxville, Tenn., in August 2019. We got the pilots off the ground in less than three months.
DL: We actually called them “go-fast” pilots. But we couldn’t have been this agile without the infrastructure that was already established.
SL: The first one was focused on the customer’s journey through the new Kroger Express at Walgreens store format. We had this theory that if we relocated the door from the corner entry to the center, it would make it easier for the customer to find what they came for – to the left is grocery; to the right is health, beauty and pharmacy. To build on this, the LED lighting system that we were already installing as part of WBA’s transformational cost management program created a Bluetooth network throughout the store that allowed us to enable beacon technology without a large cost or heavy lift, using small devices attached to carts and baskets to better understand the path through the store. We’re piloting the technology now in two Knoxville stores, and have already made physical changes after just two weeks of insights.
DL: This is delivered by Microsoft partner Acuity with their Atrius solution, which unlocks data and insights for retailers. Walgreens is now analyzing aggregated, anonymous data for cart traffic though the store. Steve’s team then looks at the data through heat maps that show an entire store blueprint – some red spots here, some blue spots there. We’re using beacons to capture analytics so his team can make sure the original store designs match what customers actually want. Over time, the data will get more and more useful.
WN: What did the early data show?
SL: Think about your own life. You buy food more often than you buy health and beauty products, or even have a prescription refilled. So, due to the grocery offerings from Kroger, we started to see customers coming to our stores more frequently.
DL: A lot of the growth we've seen at Walgreens is through this ecosystem of partnerships, not just Microsoft, not just Kroger. The rising tide lifts all boats. You want to be able to engage your customer with relevant offers – fresh produce, FedEx drop-off and pickup, Birchbox beauty, health services – whether they’re curbside, in store or online. And we want to make sure that happens in the most efficient manner.
WN: The Kroger strategic partnership created a big change for team members involved in the pilot. How are we helping our teams through the transition?
SL: The Kroger expansion definitely came with new territory for our team members. Half of this new store format is fresh food – there are 2,500 new products. So the second pilot we recommended was about reimagining how we traditionally train our teams.
DL: Previously, team members in these stores were using a combination of digital training courses, playbooks and printed binders to come up to speed. So we brought forward a great solution from a Microsoft partner called Altoura: a training program that can run on Microsoft HoloLens 2 mixed-reality smartglasses, as well as on tablets. This solution provides immersive visual training that allows team members to not just see the products, but also simulate an interaction with a customer. It can also be easily updated as new products and store layouts are introduced, and cuts down on the need to travel for offsite training.
SL: This new format – where our stores are transformed into something completely different – occurs over a week or so. HoloLens gives our team members the ability to experience what the store will look and feel like before it’s even converted, using a 3-D model built at Walgreens. This gives them more time to get excited, learn and feel confident about some of the brand new elements – what good looks like when dealing with a package of fresh meat, for example.
WN: What does that look like?
SL: It’s really, really important. Beyond just looking at the date coding, our team members have to understand the color of the meat to know its freshness. They have to learn when it may be within a day of having to mark it down in price or pull it off the shelf. And when customers come for curbside Kroger grocery pickup, there may be times when we don't have a product in stock and it might require a substitution. We also have persona training to help team members understand customers’ facial expressions during that discussion, so they know if they should lean in or ease back.
WN: What can we look forward to in Year 2, and beyond?
SL: We’re getting ready to kick off the next phase of our partnership, which is all about our journey to becoming a neighborhood health destination.
DL: Overall, we’ll continue to focus on improving the customer journey and maximizing the value of the Walgreens footprint – 78 percent of all Americans live within 5 miles of a Walgreens store – as well as supporting that ecosystem of partnerships to drive new offers, new experiences and new services.
WN: Looking back on everything in Year 1, what are you most proud of?
SL: We launched some things that are really starting to make a difference, and that becomes a catalyst for what I think is going to be a pretty exciting 2020. Now that some of this base work has been done, it allows us to be more agile and move things more quickly within the organization.
DL: Actually walking into a Walgreens store and seeing some of these changes coming to fruition – that’s most exciting. We spend a lot of time developing roadmap alignment, which is important, but when you start seeing the customer and team member engagement, it's actually working. For me, that's been the best part.
For more on the accomplishments in the first year of WBA’s strategic partnership with Microsoft, visit the Microsoft Transform blog.